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Do Fiscal Imbalances Deteriorate Sovereign Debt Ratings?

ISEG Economics Working Paper No. 24/2010/DE/UECE

31 Pages Posted: 27 Nov 2010  

Antonio Afonso

University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics)

Pedro M. Gomes Sr.

Universidad Carlos III de Madrid

Date Written: November 26, 2010

Abstract

We use sovereign debt rating estimations from Afonso, Gomes and Rother (2009, 2010) for Fitch, Moody’s, and Standard & Poor’s, to assess to what extent the recent fiscal imbalances are being reflected on the sovereign debt notations. We use macro and fiscal data up to 2009, and macro and fiscal projections, to obtain the expected rating for several OECD countries. The answer to the title question is yes, but in a diverse way for each country. Our average model predictions point to a heterogeneous behaviour of rating agencies across countries.

Keywords: Credit Ratings, Sovereign Debt, Rating Agencies

JEL Classification: C23, E44, G15

Suggested Citation

Afonso, Antonio and Gomes, Pedro M., Do Fiscal Imbalances Deteriorate Sovereign Debt Ratings? (November 26, 2010). ISEG Economics Working Paper No. 24/2010/DE/UECE. Available at SSRN: https://ssrn.com/abstract=1715850 or http://dx.doi.org/10.2139/ssrn.1715850

Antonio Afonso (Contact Author)

University of Lisbon - ISEG (School of Economics and Management) ( email )

R. Miguel Lupi, 20
Lisbon, 1248-078
Portugal
+351 21 392 5985 (Phone)
+351 21 396 6407 (Fax)

HOME PAGE: http://www.iseg.utl.pt/~aafonso/AAWeb.html

UECE (Research Unit on Complexity and Economics)

Rua Miguel Lupi 20
Lisbon, 1249-078
Portugal
+351-213 925 912 (Phone)
+351-213 971 196 (Fax)

HOME PAGE: http://www.iseg.utl.pt/~uece/

Pedro M. Gomes Sr.

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

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